Year: 2007

In the early evening at Deutsche Post’s main sorting center in Frankfurt, 4.5 million letters pass through human hands before racing across conveyor belts and under electronic eyes that can read even barely legible handwriting to divine where the letter should go. By midnight, bright yellow plastic bins of letters land on trucks for overnight sprints across Europe.
Each mailing is a slice of the roughly euro4 billion, or USD5.2 billion, that Deutsche Post takes in from its letter business each year — a third of its German revenues. Opening this business to competition would put as much of a fifth of that business at risk.

But when the German government ends Deutsche Post’s monopoly on simple letter delivery next Jan. 1, in the name of better service and lower prices for consumers, the postal service will have to open its sorting and delivery system to other players — in much the same way that former telecommunications and transportation monopolies have had to adjust.

Deutsche Post stands at the center of a simmering European showdown over throwing open simple letter delivery to competition, and the outcome is by no means certain for any of the players. On one side are the consumers and new entrants, who stand to gain, and, on the other, the old monopolies, which stand to lose.

In October, the European Commission started a campaign to get European Union member states to abolish monopolies for delivery of letters under 50 grams, or 1.8 ounces, by 2009. (Most of the rest of the mail delivery business in Europe — packages, value-added rapid services and the like — has already been opened up to competition.) Germany, which holds the presidency of the Union until June 30, is ready to take this step a year early, convinced that the result will be better and cheaper service for consumers.

Indeed, in Germany, where liberalization is arguably most advanced, new competitors have already popped up to offer Deutsche Post competition in limited areas, giving them valuable experience and ready-made networks that will come in handy when full-bore competition arrives.

But the notion that a foreign postal monopoly — for example, the French — might obtain the right to enter the German market before its own government agrees to a date for opening its doors ruffles feathers at Deutsche Post, which is demanding that Germany use its influence during its EU presidency to fix a date for postal liberalization throughout Europe.

What the Germans do — both at home, and as a leader of the EU — will have consequences for the rest of Europe. If Germany moves unilaterally, it will expose itself to competition, but if the largest European economy refuses to budge, it will set back the cause of opening markets throughout the EU, according to people involved in the issue.